Things to look out for when making a maiden real estate purchase – Amit Modi: Director, ABA Corp and Vice President , CREDAI, Western UP

Dec 31, 2014

Economic liberalization in India has led to an upwardly mobile middle class, whose spending power is increasing rapidly.

Urbanization has taken India​ by storm in last two decades,​and we find an urgent need for affordable ​residential spaces, which live up to the rising demand of the aspiring ​first time buyers.

This pace of growth has further been accelerated by a plethora of purchase options and considering that the middle class or the first time buyer will be throwing in the last penny from their life saving to make this dream a reality, their investments need to be safeguarded from various factors that could prove to be instrumental in destroying its validity as well the reputation of the real estate sector.

Certified due diligence

Due diligence acts as the shield against the innumerable variables which could make one’s property redundant and hence a detailed due diligence of the property is a must to insulate the sale from future legal complications.

This mainly includes legal clearances, payment of municipal, electricity, water charges and property credentials in the local registrar’s office along with occupation and completion certificates. These two certificates show that the property meets local development rules and are usually the basis on which individual connections for electricity, water and sewage are granted.

Expert Advice: Look out for “Allotment Letter and Sanction Letter” certificate, also check if the floor of the apartment you are purchasing exists in the construction plan or not avoid any future legal hassles. (Certain bye-laws may differ from state to state, as development authorities across the country are government by state governments).

Investment under construction

More often than not, investment in under construction properties turns out to be more economically viable for the home buyer. One needs to make sure that before the sale is made, the parent documents of the land, development approvals, and transfer of development rights to the builder are checked.

A clear land title is a must and should be validated. The buyer should confirm whether the land on which the project has been planned is sanctioned by competent authority of the area.

Expert Advice: There is also a need, to check clauses related to ‘cost escalation’ and ‘penalty for delayed payments’, to avoid further complications in future (Remember even pre-launch bookings should happen after the land is registered.)

Bank on the banking system

Banking and financial institutions have a foolproof system of due diligence before processing loans. They have dedicated team which can do more work and research on a project than any person in an individual capacity.

Also while your loss can have to potential to be the biggest loss in your life, it’s still way to less in simple monetary terms that an institution may have to bear.

Expert Advice: In a sector which is a potential minefield for various legal pit-falls, a smarter route would be to verify whether known Banking and Financial Institutions are open to providing loans for the project. Is the project aspired for, on their approved list?

Check Resume & Work experience

The resume of the Developer, in terms of projects completed is as important as the project itself. A great deal for a customer, would also be a property or project which gets completed on time and is free from legal tangles. This is only possible if the builder has a good reputation in the market and has been an industry player over a longer period of time.

Expert Advice: Check previous projects and properties of the developer; if possible make a physical check on the previous properties. The future value of the invested property can be gauged by comparing the current value of his earlier completed projects benchmarking it to competition. In case the developer is new in the market it is advisable that a more meticulous study is undertaken.

Early bird catches the worm

With multiple Developers in the fray, the buyer should be on the constant look-out for attractive schemes to make the investment sweeter.

Expert Advice: Look out for considerable discounts on upfront payments, additional parking space and discounts on fittings, furnishing to the investor.

Think long term

Though real-estate in India promises a remarkable return on investment, certain areas still hold large inventories and hence absorption could take some time. Hence it is advisable to invest in one’s own property as an end-user, rather than look out for short term gains.

Expert Advice: If you are in for a long run, invest in a larger apartment with amenities like open spaces and playgrounds, top-of-the-line security measures and landscapes, as these factors are important if you are looking turn an apartment in to a home for your family.

Final Words

Investing in a residential property is not just a financial investment but an emotional decision as well, and therefore one’s maiden purchase has to be built on a rock solid foundation pivoting on in-depth research and multiple – level due diligence.

Final Advice: Even law does not support negligence ​

K. Altaf, Managing Editor , Corporate Comm India